Making its debut on 07/24/2000, smart beta exchange traded fund iShares Core S&P U.S. Value ETF (IUSV) provides investors broad exposure to the Style Box - All Cap Value category of the market.
Artificial intelligence (AI) is dominating investors' attention this year. The technology has already delivered some impressive practical applications, and it has sent stocks like Nvidia surging.
Microsoft (MSFT) shares ended the last trading session 4% higher at $359.49. The jump came on an impressive volume with a higher-than-average number of shares changing hands in the session. This compares to the stock's 1% gain ove
U.S. stock index futures crept higher on Wednesday with all eyes on second-quarter results from Tesla and Goldman Sachs, a day after upbeat bank earnings helped the Dow post its longest winning streak in two years.
Wall Street has grown particularly bullish about Microsoft (NASDAQ: MSFT) this year, with its stock up 44% since Jan. 1. The company has impressed investors by getting a head start in artificial intelligence (AI) and inching closer to closing a historic deal to acquire video game
Stock markets were mixed on Wednesday with growth concerns dragging down China while elsewhere futures rose after British inflation came in surprisingly soft for once and U.S. data stoked hopes the world's biggest economy can avoid recession.
Asia's stock markets were mixed on Wednesday with growth concerns dragging on China's equities while shares rose in Japan and Australia after healthy U.S. company earnings and retail data bolstered hopes the world's biggest economy could avoid a recession.
British inflation data this morning could be the toast of trading desks if it follows updates from the U.S. and Canada and surprises on the downside. A tentative rally in gilts is poised to extend and sterling could probably say goodbye to the strong side of $1.30.
eBay’s stock (NASDAQ: EBAY) has gained approximately 12% YTD, as compared to the 17% rise in the S&P500 index. However, at its current price of $47, the stock is trading 5% below its fair value of $49 – Trefis’ estimate for eBay’s valuation.&
Asia's stock markets were mixed on Wednesday with growth concerns dragging on China's equities while shares gained in Japan and Australia after healthy U.S. company earnings and retail data added to hopes that a recession there can be avoided.
The
T. Rowe Price Blue Chip Growth ETF (
NYSEARCA:TCHP)
is a relatively new, growth-oriented ETF from asset manager T. Rowe Price (
NASDAQ:TROW
) that has raced out to an impressive gain of nearly 40% year to date. There’s a lot to like about the ETF, but there are also some considerations that investors should think about before deciding whether to invest. Let’s take a look at why.
What Does the TCHP ETF Do?
Launched in 2020, TCHP is a growth ETF from T. Rowe Price that “seeks to provide long-term capital growth” with income as a “secondary objective.” According to T. Rowe Price, TCHP “focuses on companies with leading market positions, seasoned management, and strong financial fundamentals.”
TCHP's Top Holdings
TCHP holds 78 positions, but its top 10 holdings account for 63% of assets, so the fund is fairly concentrated. In fact, its top two positions, Microsoft (
NASDAQ:MSFT
) and Apple (
NASDAQ:AAPL
), combine to make up roughly 25% of the fund. TCHP isn’t alone in this regard, as Apple and Microsoft have accrued massive market caps with their gains this year and dominate the top holdings of many ETFs, but it's one thing that investors should be aware of.
Below, you can take a look at
TCHP’s top 10 holdings using TipRanks’ holdings tool.
As you can see, outside of Apple and Microsoft, the rest of TCHP's top holdings are dominated by other mega-cap tech names like Amazon (
NASDAQ:AMZN
), Nvidia (
NASDAQ:NVDA
), Alphabet (
NASDAQ:GOOGL
), Meta Platforms (
NASDAQ:META
) and Tesla (
NASDAQ:TSLA
), along with several other popular growth names like Visa (
NYSE:V
), Mastercard (
NASDAQ:MA
), and UnitedHealth Group (
NYSE:UNH
).
As you can see, these holdings boast some pretty impressive Smart Scores across the board. The
Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A score of 8 or above is equivalent to an Outperform rating. An admirable seven out of TCHP’s top 10 holdings feature Smart Scores of 8 or above.
TCHP itself features an Outperform-equivalent ETF Smart Score of 8 out of 10.
Is TCHP Stock a Buy, According to Analysts?
Turning to Wall Street, TCHP has a Moderate Buy consensus rating, as 74.51% of analyst ratings are Buys, 22.45% are Holds, and 3.03% are Sells. At $30.12, the
average TCHP stock price target implies 3.85% upside potential.
A Lot to Like, But…
With a strong portfolio, favorable views from analysts, and an Outperform-equivalent Smart Score, there is a lot to like about TCHP. However, looking beneath the surface, there is one major caveat that investors should consider before investing.
With a list of top holdings dominated by Microsoft, Apple, and other mega-cap tech stocks, TCHP isn’t all that different from many of the much larger and more well-known growth ETFs out there, like the
Vanguard Growth ETF (
NYSEARCA:VUG)
, the
Schwab U.S. Large-Cap Growth ETF (
NYSEARCA:SCHG)
, or even top tech ETFs like the
Invesco QQQ Trust (
NASDAQ:QQQ)
, for that matter.
There is plenty of overlap between these funds -- in fact, TCHP and VUG share eight of the same
top 10 holdings, TCHP and SCHG share nine of the same
top 10 holdings, and TCHP and QQQ share seven of the same
top 10 holdings.
As you can see, TCHP isn’t particularly differentiated from these popular funds. This wouldn’t be a major issue in and of itself if it wasn’t for another concern -- TCHP has a significantly higher expense ratio than each of these three alternatives. Now, TCHP is actively managed, so of course, it is going to have a higher expense ratio than these index ETFs, but with so much overlap between the funds, it’s somewhat difficult to make the case for a significantly higher expense ratio.
How much higher is it? TCHP has an expense ratio of 0.57%. This is over 10 times higher than the expense ratios for VUG and SCHG, which both charge just a minuscule 0.04%. It’s also nearly three times higher than QQQ’s expense ratio of 0.20%.
Clearly, TCHP is more expensive, but what does this look like on the ground? An investor putting $10,000 into TCHP would pay $57 in fees in year one, while an investor in QQQ would pay $20, and an investor in VUG or SCHG would pay just $4.
The disparity becomes even more pronounced over time as these fees compound over the years. Assuming the fees remain the same and each ETF returns 5% per year over the next ten years, the SCHG and VUG investors would pay just $51 in fees over the course of the decade. The QQQ investor would pay $255 in fees, and the TCHP investor would pay a significantly higher $714 in fees over a 10-year time frame.
Again, in fairness to TCHP, it is actively managed, so its fees are going to be higher than for an index ETF, but this is a pretty significant gap, especially given the fact that these funds don't look significantly different from a holdings perspective.
Furthermore, while they have low fees, QQQ, VUG, and SCHG have all been around for a long time and compiled excellent long-term track records when it comes to performance, with all three offering investors double-digit annualized returns for a decade or more. On the other hand, TCHP has only been around since 2020, so it has not yet compiled this type of reliable track record.
Investor Takeaway
None of this is to pick on TCHP, as it seems like a good fund and could yet go on to establish a fine track record of its own over the years, but it is worth pointing out that there are plenty of alternatives that offer investors similar exposure with lower costs and with longer track records. In and of itself, TCHP looks like a perfectly fine ETF, but investment opportunities never exist in a vacuum, and it's always important to consider alternatives.
Disclosure
Fool.com contributor and 25-year stock market veteran Eric Cuka shares the companies currently in the trillion-dollar club and the seven best stocks to buy that will likely join the ranks next.
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